Fortress CEO Scott Purcell steps down after crypto custodian’s sale to Ripple falls through

Fortress CEO Scott Purcell steps down after crypto custodian’s sale to Ripple falls through

Scott Purcell, the founder and CEO of the embattled crypto custodian Fortress, has stepped down amid broader staffing issues.

The decision comes on the heels of a hacking incident in early September that saw Fortress lose between $14 million and $15 million of customer funds. Clients were later made whole by Ripple, the blockchain firm behind the popular cryptocurrency XRP.

Fortress also laid off at least six employees, the majority in sales, Fortune has learned. When reached for comment, Purcell confirmed his departure, saying Fortress has hired a new CEO—the former COO of the crypto investment firm iTrustCapital, according to an announcement posted to LinkedIn on Monday. Purcell told Fortune he will remain a board member of Fortress’s parent company.

Purcell has a rocky record in the digital asset space. He previously was the CEO of Prime Trust, a different crypto custodial service, or business that holds crypto assets such as Bitcoin on behalf of clients. In July, Prime Trust went into receivership with the Nevada Financial Institutions Division, and it declared bankruptcy in August. Purcell had stepped down as CEO of the company as of 2021.

According to the receivership petition filed by the Nevada regulator, Prime Trust discovered it was unable to access some of the wallets storing user cryptocurrency in December 2021, allegedly then using customer funds to satisfy withdrawals.

Fortress falling

Purcell founded Fortress in October 2021, with the firm becoming a major player in the custodial space. Its growth was derailed over the summer when hackers stole millions of dollars worth of crypto assets, mostly in Bitcoin. Purcell later told Fortune that the incident affected only six out of the company’s 225,000 customers.

Before the hack was publicly acknowledged, Ripple had announced its planned acquisition of Fortress, citing the firm’s Nevada trust license as one of the reasons for the purchase. The crypto industry publication The Block reported that Ripple had stepped in to make customers whole as part of the acquisition.

Ripple abandoned the acquisition plan in late September. Purcell said a subset of Ripple staff were not interested in diversifying to consumer-focused products. (Fortress’s crypto rails let banks, for example, offer retail customers the ability to buy Bitcoin through their IRAs.) A spokesperson for Ripple told Fortune that the decision to back out of the acquisition was “not due to the hack or how Scott handled it” and said that Ripple will remain an investor in Fortress.

Even though it backed out of the deal, Ripple has not required Fortress to immediately return the money—essentially a loan—it gave the custodial firm to make customers whole. “They’re not stressing out about it,” Purcell said, “and neither am I.”

Shortly after news broke of Ripple backing out, Purcell said Fortress had laid off four members of its sales team as well as several other employees. He later said the company had since hired back an equal number.

As for Purcell’s next venture, according to his LinkedIn, he founded a startup earlier this month that’s in stealth mode.

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